A learning curve applies to the manufacture of the first 256 units of a product. During the manufacture of the first 255 units, the time taken to produce each successive unit is expected to:
A. Reduce at a decreasing rate.
B. Reduce at a constant rate.
C. Reduce at an increasing rate.
D. Reach the steady state.
For a pharmaceutical manufacturer, in which perspective of the Balanced Scorecard should the performance measure 'number of patents granted during the year' be included?
A. Customer
B. Internal business processes
C. Innovation and learning
D. Financial
An 80% learning curve will apply to the production of a new product. The first unit will require 120 labor hours. The labor rate is $11 per hour. To the nearest $1, the expected total labor cost for the first 4 units is:
A. $3,379
B. $845
C. $5,280
D. $4,224
A company's competitor has just launched a rival product at a selling price of $38 per unit. Until now the company's selling price of $41.60 per unit has achieved a 30% mark-up on the product's unit cost. The company proposes to use a target
costing approach to pricing to remain competitive. Management has decided to match the competitor's selling price and has set a target cost to achieve a 20% return on the target price.
What is the cost gap?
A. $1.60
B. $3.60
C. $0.33
D. $1.28
Which of the following is a key objective when agreeing a basis for setting transfer prices?
A. Promoting goal congruence
B. Increasing market share
C. Rewarding profit centre managers
D. Allocating overhead costs effectively
Which of the following statements is correct in respect of the key feature of dual pricing?
A. The selling price recorded by the selling division is higher than the cost recorded by the receiving division.
B. Internal customers are offered trade discounts depending on the number of units they purchase.
C. Internal transfers are priced at marginal cost and a lump sum payment is made subsequently to contribute to fixed costs.
D. Internal customers are charged a lower price than external customers to reflect savings in distribution costs.
An investment centre is appraising a potential project that is expected to yield a Return on Investment (ROI) of 12%.
Without the project the investment centre expects to earn an ROI of 14%. The cost of capital is 10%. What would be the impact on the investment centre's performance measures if the project is accepted?
A. Residual Income would decrease and ROI would increase.
B. Residual Income would decrease and ROI would decrease.
C. Residual Income would increase and ROI would increase.
D. Residual Income would increase and ROI would decrease.
A machine requires an initial investment of $500,000. The net present value (NPV) of the investment in the machine is $36,500. Which of the following statements is correct in relation to the sensitivity of the investment?
A. The initial investment can increase by no more than 7.3% before the project is not viable.
B. The NPV can decrease by no more than 7.3% before the project is not viable.
C. The initial investment can increase by no more than 13.7% before the project is not viable.
D. The NPV can decrease by no more than 13.7% before the project is not viable.
The discount rate at which the net present value (NPV) is zero is known as the
A. accounting rate of return
B. risk adjusted discount rate
C. internal rate of return
D. breakeven point
Which THREE of the following are advantages of changing from a 'top-down' to a 'bottom-up' (participative) style of budgeting?
A. The budget will be based on information from employees who are familiar with the day to day activities.
B. Motivation will improve due to a feeling of ownership of the budget.
C. There will be increased commitment to organizational objectives.
D. Budget setters will be forced to justify every item on the budget.
E. There will be reduced likelihood of budgetary slack being built into the budgets for 'selfish' reasons.
F. It will be less time-consuming for operational managers.
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